United Kingdom telecommunications

Vodafone in talks to merge Indian unit with Idea Cellular

January 31st 2017 | United Kingdom | Internet | Multiple companies

Vodafone said on January 30th that it was discussing an all-share merger of its Indian unit with domestic network operator Idea Cellular. The confirmation came soon after media reports surfaced that the companies were looking to join forces.

UK-based Vodafone said that the merger with Aditya Birla Group, an Indian conglomerate, excluded Vodafone's 42% stake in Indus Towers. The company said that any merger would be funded through the issue of new shares in Idea to Vodafone and would result in the spinoff of Vodafone India.

A successful merger would create India's largest telecoms operator. It would also provide the firms with the means to effectively take on industry titans Bharti Airtel and Reliance Jio. The announcement follows a deal between two other Indian telecoms firms, Aircel and Reliance Communications, who agreed to merge last year.

Since Reliance Jio entered the market in September 2016, touting its heavily-discounted services, other companies have been pushed to lower their prices in order to hold on to their market share, causing significant disruption in the Indian mobile market. Vodafone's plan to merge with Idea is largely seen as a way to combat the threat from Reliance Jio, whose various free mobile offerings have cut into rivals' bottom line. Although a possible merger has between Vodafone and Idea has long been touted, it is believed that Reliance Jio's swift success in the market has accelerated talks.

The Economist Intelligence Unit expects the number of mobile-phone subscriptions in India to exceed 1.5bn by 2021. The combined operation of Vodafone and Idea will reportedly give them a 43% share of the Indian market by 2018-19.